How recent layoffs at tech startups have proved a blessing for younger companies

The recent spate of senior-level exits and layoffs at technology startups has proved a blessing for some firms.

The exits, triggered by shutdowns, acquisitions or cost cuts, have created a pool of topnotch talent for younger firms to pick from —people with more startup experience than the mostly twenty-something, first-generation entrepreneurs hiring them. Senior roles and promising stock options ensure loyalty and engagement.

"Once we got to know that a Mumbai-based company would be resizing their staff, we parked four of our tech architects and the HR (human resource) at Mumbai for two days for back-to-back interviews," said Manish Chopra, co-founder of deal discovery firm Little.

"That was very fruitful as we will be onboarding a senior product lead and an analytics person soon," said Manish Chopra of Little. Bigger fish — former chief executives and startup founders — too can be found, often on the recommendation of investors in companies that had to fold or be acquired unable to raise money, said Chopra.

His Paytm-backed company recently hired four key executives, including Mukesh Jha, cofounder of Autowale, as vice-president of seller marketing. This was after Autowale was acquired by autorickshaw aggregator Jugnoo, another Paytm-backed company.

"It is a practice among investors to inform other portfolio companies when one of the companies is downsizing staff," said Alok Goel, managing director at venture capital firm SAIF Partners.

Recent layoffs from startups including Housing, Foodpanda and TinyOwl sent talent scouts on the lookout for interesting resumes. Housing gave the pink slip to more than 800 employees last year. The recent acquisitions of realty website Commonfloor by online classifieds Quikr and of budget stay aggregator Zo Rooms by rival Oyo Rooms were followed by the founders of the target companies making calls to ensure the best employees weren't laid off.

"On an average, each founder I have spoken to has recommended three to four employees. It is the humane thing to do when the company is unable to raise funds or is looking to resize its employee base," said Pranav Goel, co-founder at mini-truck aggregator The Porter, which is backed by Sequoia Capital.

Typically, these calls are from the founders of small companies, he said. "While Series A-funded companies typically may have 50-60 people and it will be hard to place all of them, seed-funded companies that have 10-12 employees with more emotional bonding" tend to put in more effort to help colleagues land a new job, said Subramanya SV, co-founder of personal finance startup Fisdom.

Frequent retrenchments have also brought in sanity in terms of the pay packages. "A couple of years ago employees were attracted by startups paying a much higher premium over other industries. Now, employees understand the value of stock options and are ready to move more or less at similar fixed cost to a smaller startup but at a much higher equity, anything ranging from 1-2 times of the fixed salary," said Aneesh Passi, co-founder of Basil Advisors, which helps startups hire senior executives.